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Monday, July 21, 2014

Great Park CEO Mike Ellzey's Hard Hitting Forensic Audit Deposition

For this chapter of the breaking story I think what I will do is just pull quotes from the deposition and let them speak for themselves. It's 200 pages long and chock full page after page of information that many people(including me) in Irvine have suspected for a long time. Having said that, I was still completely blown away by the scope and breadth of what actually happened to the $200 million dollars Lennar gave the city in 2002 after the El Toro base was auctioned off. The crazy thing is that the final audit report still doesn't come out until around September according to comments made at the last Council meeting. So let's get started with the deposition quotes. It was performed by the city attorney for the forensic audit, Anthony Taylor.

So I began to - I began to figure out that, at best, Yehudi Gaffen was my counterpart, and at worst, I was, de facto, working for him. Certainly working for Arnold Forde."(Page 53)

"It wasn't until I became CEO, when, as you indicated earlier, I began to look at reports and budgets and things that would otherwise become a CEO's responsibility, and I saw a hundred-thousand-s dollar-a-month line item. And I remember as though it was yesterday that I went into Kurt Mowery's office, who was the manager of finance, and I believe Debbie Gunderson was in that office with him, and I said, "What is this hundred-thousand dollars a month for Forde & Mollrich?" And they told me what it was, a hundred-thousand dollars for public relations. And I said, we've got to reduce that. I mean, that's way too much. We've got to reduce that. And they literally laughed. Q Why did they laugh, if you knew? A I asked them, "What• -- "why are you laughing?• You know, "Good luck on that,• basically, •Good luck on that.• Q Do you know why they were making those statements? A Yes, because I- I didn't know at the time,but -- here I was, new guy coming in starting to make changes because it was now my shop, and one of the things I wanted to change was how could we possibly be using a hundred-thousand dollars a month for public relations, how could we possibly be using that. We have to lower that. Doesn't anybody see this?(Page 58)

Yeah we see that Mike bright as day. Next....

"We didn't create a budget until - we took the completed comprehensive park design and had an independent body cost estimate something already designed. So there was never a budget associated with the design. That, to me, is a waste -- was a waste. So we had no idea how much money we would have, how much money it would take, where the money would come from, or any of those things when we were going through this three-year design process".(Page 74)

Did you get that last quote? No budget whatsoever for design work. LOL

"It's not that those kind of studies were a bad thing, it's just that the Design Studio would create the scope for the studies and would attach huge budgets to each, and then as it turned out, on the first one or two of them, they just did a terrible job and I had to fire them and give them to -- and reorganize the way that they would get done. So they just did a terrible job on those. And all those early studies did was churn fee. They did not know what they were doing, and it was - it was a terrible product and we literally had to stop them from doing it".(Page 76)

In my business if you churn fees in your customers brokerage account, you can be severely punished civilly and criminally potentially. Seems to be business as usual for the Design Studio. Next clip....

"But, no, there was - to my recollection, I don't recall seeing any e-mails or letters or anything like that that would be in furtherance of the culture that I've described. Q And what I'm specifically getting at is if you were getting e-mails from any specific council member or chairperson, Forde & Mollrich, Gafcon, any specific person involved with those entities or employed by them, where they were asking you or telling you to do things that you were not comfortable doing. A No. Q And so when you've testified ear1ier today about this culture, you're talking about oral
communications to you,not written communications;is that correct? A Yes. Larry never used e-mail. Any communication to Larry was done by phone or by fax". (Page 93)

Did you catch that. Larry never emailed folks sensitive information about what was going on. Maybe he had a lot to hide? Next clip....

"Q Based on everything you learned,what is your opinion why Gafcon became so powerful? A I think he was a yes-man to Larry. So if Larry wanted something done, he would go to Gaf to get it done. And I know that because as recently as the year when Beth Krom was chair, where Larry - were they
still had the majority,Larry gave up the chair to Beth Krom, but he still essentially worked with her behind the scenes and operated, In a way, through her
Now, If you talk to any of the staff people who were around at that time, including Christina Templeton or Cliff Wallace, he screwed that thing up so bad. Not that Larry never knew or fully appreciated it, or maybe he was in denial,but people had to save that project from failure, but Larry never really knew that Larry never fully appreciated, until years later, how bad he was. So - so Larry was the classic surround yourself with yes men, yes-people. And he would walk around out - out and do a tour and he would have an entourage of 8 or 10 or 12 people with clipboards and writing down notes of everything he said, you know, and that was who he surrounded himself with. And Gaf was one of those people. And he would - he would manage a group of those people. I mean, he would - he would develop nothing but yes.people. '"The chairman said to do this. The chairman said to do that" Q And in - A So even in a private - even In a private design studio, they would say, 'Well, the chairman told us to do it". (Page 106)

Control freak central it sounds like. A lot of that in politics. I shouldn't be surprised.

"And so we would have a list of things that we would eventually have to go back and tell him that we thought they were bad ideas, we thought they couldn't get done, whether it be -at one point, for example, he wanted us to install stationary bikes at the carrousel to generate power for the carrousel. And,you know, we just thought that that - technically, we just thought that that was a terrible idea".(Page 110)

I included this quote for comedy relief. Speaks for itself. Wouldn't this be a violation of the Americans For Disabilities Act though? Just asking. Next clip is the best one of the whole deposition....

"Q And you write about that in your statement, and I don't mind skipping ahead to that portion of it. You wrote about a series of meetings that you had with Arnold Forde. And I believe you wrote at one point he threatened your job. A Well, he threatened to come after me, which I took for -took to be threatening my Job. Q Did you ever feel that he threatened to come after you physically? A No. But I also viewed Arnold Forde as being somebody who could potentially do that through others. Yeah,I viewed - both Brendan and I both became somewhat concerned that It could get - it could lower
itself to something like that potentially. Q What made you concerned about that? A Because I stood between Arnold and a hundred-thousand a month, and that's big money. And the power of the majority had the potential to keep whatever thing they had going, going. And I don't know - I don't know 80 percent of what Arnold and Larry had going or Gaf had going. I don't know. All I know is Arnold was Larry's voice into the project. I have no idea what they did most of the time or what they had going most of the time. But Arnold was -and I don't even know whether he was kind of like the guy in the Wizard of Oz where behind the curtain is some nobody, scrawny guy, but Arnold himself presented himself and portrayed himself and acted as a mafioso-type guy". (Page 121)

So the consultant we paid over $100k/month was acting like a guy in the mafia. That's just so nice to know.

"Nobody coordinated the disciplines, that's exactly right. Disciplines submitted something. Somebody at a junior level put the document together and made it look pretty, but nobody coordinated the disciplines. Nobody coordinated the production of the disciplines so that they came in a coordinated way. All they did was take the different disciplines, once they were done, and put them into a package. Q Was this the worst product you had ever seen in your career? A Yes. And others will say so, too. Q When you say others," who else should I talk to that would testify to that?
A Brendan McDevitt, Jeff Warner" (Page 158)

"Worst product you had ever seen" Again it speaks for itself. Next clip....

"It just seemed that we were -we just kept - we kept designing and kept planning and kept designing, and it didn't seem like - until we began to put a stop to it and start developing the western sector plan, we - we weren't doing anything that was leading to a construction project. And it just seems like - it seemed as though we could have done that for two or three more years and spent all of our money on design if we had allowed it to
happen, because that - the Design Studio was a design studio. They were there to design, and they were -there was no, like, end game for the Design Studio". (Page 163)

Bombshell Great Park Forensic Audit Declaration By GP CEO Mike Ellzey

If there were any lingering doubts about what happened the last ten years out at the Great Park in Irvine, GP CEO Mike Ellzey has laid those to rest. A 200 page deposition of Ellzey by city attorney Anthony Taylor was delivered today to Irvine City Hall in compliance with the California Public Records Act. The deposition is wide ranging and almost 200 pages long. It also includes a 29 page exhibit of a sworn declaration by Mr Ellzey. It details potential fraud perpetrated against Irvine citizens by Council Member Larry Agran and his complicit majority of Beth Krom and Suhkee Kang the likes of which are unprecedented in Orange County and I dare say the country.
I think what I will do to start is pull some quoted from Mr Ellzey's declaration and add my comments.

"The consultant was telling the client what to do. The City was not treated like a client or owner, but more as a facilitator and expediter of projects determined by others. When I realized the depth and breadth of this culture, it concerned me greatly. Based on my experience managing large public projects, this practice was clearly unacceptable for a public agency".(Page 3 & 4 of the declaration)

You can tell right away this is gonna get ugly

"The Great Park Design Studio and the Great Park staff did not have a healthy consultant-client relationship. Directives by staff were routinely questioned and often times ignored; invoice review and reconciliation was a persistent battle; respect for city staff was fleeting - for the program manager(Bovis and later Brendan McDevitt), non-existent"(Page 4)

Let me translate this. The city paid over $10 million to Bovis and later Brendan McDevitt to oversee the Design Studio. The open source software that the Studio and staff were all supposed to input invoices and data into was so crappy that it turned out to be useless. Was this done on purpose by Larry to make it harder to find a paper trail as you will see later in the declaration and deposition? Maybe. Let's continue...

"The Great Park Corporation was not allowed to seek services from other firms in an effort to secure superior technical skills or lower costs. At the direction of the "power structure"(made up of Larry Agran, Arnold Forde, and Yehudi Gaffen) at the Design Studio, all planning and design work was to go through the Studio"(Page 5)

Keeping operational control seemed to be very important.

"The Design Studio consistently insisted on performing design, construction management, and construction administration for all projects. This arrangement does not reflect responsible industry practice."(Page 6)

Mr Gaffen(head of Design Studio) did not hold any professional licenses for architecture or civil engineering. This apparently made him highly qualified. Continue....

"Design management under Gafcon for a project of this scope and complexity was at times incompetent, disorganized, too expensive and politicized.
- The Design Studio team did not have a California licensed architect of record
- The Design Studio team did not have a dedicated California licensed civil engineer.
- Third party reviews were being refused by the Design Studio.
- The Design Studio exposed a practice of hiring relatively inexperienced and unqualified staff for a project of this scope and complexity, and yet systematically employed a practice of charging premium rates".(Page 12)

Nothing to see here, LOL.

"The Design Studio was overly dismissive of known design constraints on the El Toro property. A number of examples of this practice were discovered.
- The 50% design package altered the Navy extraction well system to support a Master Plan that was not buildable. When the package was submitted to the Navy, the Navy commented that the design was "VOID OF USEFUL INFORMATION"(Page 13)

Are you starting to get the picture of where this is going yet?

"It did not take long to appreciate that Chairman Agran, Yehudi Gaffen and Arnold Forde comprised the "power structure" for the Great Park project...
...the acumen for large scale project development was sorely deficient.
The Chairman's and the project's best interests were not being served by Mr. Gaffen. In my opinion, the interests of the City were systematically being subordinated to greed and overcome by incompetence."(Page 20)

I see an episode of American Greed in the future unfortunately telling this story.

"Other than the environment I've described in this paper - the like of which I deplored - and the role Mr Forde played in its perpetuation, the fundamental problem I had with the Forde & Mollrich engagement was the fee of $100k per month. Period....I was finally able to gather the support necessary to advance a proposed budget that included a reduction in the Forde & Mollrich contract. I recommended a 50% reduction to $50k per month(still an outrageous number mind you)(Page 26)
During the holiday season in 2011, Messrs Forde and Mollrich and I met at the bar at Bistango's restaurant. During this meeting, the discussion again turned to the pressure on our budget presented by the Forde & Mollrich fees. Again I suggested that it would be difficult to justify another year at $100k per month. Mr Forde replied simply that if I came after his contract, he would come after me; I should leave their fee alone.(Page 28)

Threats are always nice to see by a consultant you hired. Just wow.
This concludes Mr Ellzey's statement and my comments. Wait until you read his deposition!